Hong Kong beat out Singapore as the freest economy in Asia Pacific and across the globe according to the Heritage Foundation’s 2019 index of economic freedom, with a freedom score of 90.2 compared to the Lion City’s 89.4.
Singapore’s overall score inched up by 0.6 points on the back of increases in scores for trade freedom and government integrity outpacing modest declines in labour freedom and property rights.
“Singapore owes it success as a highly developed free market economy in large part to its remarkably open and corruption-free business environment, prudent monetary and fiscal policy, and a transparent legal framework,” Heritage said. “The government has continued to promote economic growth through an active industrial policy that targets fiscal incentives, increases public investment, promotes development of skill sets attractive to foreign investors, and focuses on economic diversification.”
In terms of rule of law, Singapore protects property rights and enforces contracts effectively. On the other hand, the government’s overwhelmingly successful track record in court cases raises questions about judicial independence, Heritage noted. “Singapore is one of the world’s least corrupt countries and has numerous safeguards and audit controls in place.”
That being said, Singapore business freedom score dipped 0.1 percentage points (pp) to 90.8% from 90.9% in 2018, whilst its labour freedom score slipped from 92.6% to 91%.
Heritage also noted how Singapore’s top individual income tax rate came to 22%, whilst top corporate tax rate stood at 17%. Over the last three years, government spending amounted to 17.6% of the country’s gross domestic product (GDP), whilst budget surpluses averaged 4.3%.
“The overall entrepreneurial environment remains one of the world’s most transparent and efficient,” Heritage highlighted. “The business start-up process is straightforward, with no minimum capital required. The labour market, supported by flexible labour regulations, is vibrant and functions well.”
On the other hand, Hong Kong’s stellar performance for trade freedom, monetary freedom and government integrity countered the decline in judicial effectiveness sustained its status as the world’s freest economy. Rounding out the top five freest economies in the APAC were New Zealand, Australia and Taiwan.